New York Forex Report: Buck Bid As FBI Probe Trump

New York Forex Report: Buck Bid As FBI Probe Trump

New York Forex Report: The USD has emerged broadly higher from the FOMC decision; The Fed funds target rate was lifted 25bps as expected but the Fed also stuck with its base case view of one additional rate increase this year, suggested that it will start to unwind its balance sheet shortly and suggested it was looking through low inflation at the moment. With Chair Yellen making no concessions to expectations that the policy meeting might sound a little dovish, the USD has recovered some of the recent losses versus its G10 peers on short covering while global stocks are trading more defensively and developed market bonds have sold off, with the US Treasury market out-performing some quiet soft trends in core European markets (France, Italy). The AUD is holding up relatively well on positive jobs data and firmer iron ore prices. Markets remain quite sceptical that the Fed will deliver on a third rate hike this year – September Fed Funds futures pricing suggests less than 20% probability and Dec pricing suggests something nearer 30%. Press reports this morning suggest that Special Counsel Mueller’s probe into Russian interference in the 2016 presidential election will now also look at whether President Trump tried to slow the FBI investigation into NSA Flynn. The president’s problems are liable to slow implementation of the administration’s agenda and sustain investor interest in moving capital to less risky and more promising destinations (recently this has been Europe).

USD The Fed raised rate by 25 bps as expected and signaled that another rate hike remains on the table in 2017, in line with earlier projection of three hikes this year. Fed fund target range is now between 1.00% and 1.25% as all but one voting members voted for the hike. A separate statement spelled out the details of how the Fed intends to shrink its $4.5 trillion balance sheet. The initial cap will be set at $10 billion a month comprising $6 billion US Treasuries and $4 billion MBS. Fed Chair Yellen hinted that implementation may get underway “relatively soon” if economic data continue to point to sustained economic recovery.

EUR ECB stated that it sold a small portion of its USD holdings to make in an investment worth EUR 500M in Chinese Renminbi. The central bank said the investment “reflects the importance of China as one of the Eurozone’s largest trading partners” and completes a decision taken by the Governing Council on May 20.

GBP The UK claimant count increased 7.3k for May from a revised increase of 22k the previous month and lower than the expected increase of around 12k. Unemployment held steady at 4.6% for the latest 3-month period and at the jointlowest rate since 1975. The employment rate increased to 74.8%, the highest level since 1971, as employment increased 109k from the previous three month period. As far as average earnings are concerned, there was a decline in the headline year-on-year growth rate to 2.1% from a revised 2.3% previously and compared with expectations of a 2.4% rate for the month.

JPY Japanese industrial production rose 5.7% in the April year, unrevised from the preliminary report. This is the strongest rate of growth in the sector since early 2014. BoJ policy makers are likely to take a recovering industrial sector into some account tomorrow but, with inflation liable to remain well shy of the central bank’s target for the foreseeable future, no change in policy settings are expected at this meeting.

Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – Breach of 1.12 from above reaffirms range trade delaying attempts at equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. As 1.1260 caps upside near term downside objective is sited at 1.1125 symmetry swing support.

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives
Retail Sentiment: Bearish
Trading Take-away: Long

Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – Retest of 1.2639 post election low survives and the subsequent short squeeze is testing pivotal resistance at 1.2785 ahead of symmetry swing resistance sited at 1.2842, price action appears corrective for now, leaving 1.2639 vulnerable to another test.

1-3 Week View – The weekly failure to close above 1.3045 ahead of the broader symmetry swing objective sited at 1.3238 suggest underlying weakness persists 1.2450 becomes pivotal for the medium term perspective
Retail Sentiment: Neutral
Trading Take-away: Neutral

Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – Near term as 110.30 contains upside reactions 108 will be a key downside objective. Over 110.50 opens 111 symmetry swing resistance a closing breach of this level would reset focus on upside objectives.

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bullish
Trading Take-away: Short

Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – Bullish consolidation targets 129.44 as the medium term upside objective, near term upside objective of 126.84 equidistant swing objective, only below 122 concerns near term bullish bias, opening a move to test 121.36.

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 a weekly breach of this level opens 129.44 as the broader upside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral

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